FOR IMMEDIATE RELEASE AT

THURSDAY, JANUARY 5, 2006 (202) 514-2007

WWW.USDOJ.GOV TDD (202) 514-1888

Four New York Archdiocese

Purchasing Representatives Indicted
on Fraud, Tax and Obstruction of
Justice Charges
WASHINGTON, D.C. -- A federal grand jury returned an indictment today against
four individuals for participating in self-dealing schemes that netted them more than
$2 million while acting as executives and purchasing representatives of the
Archdiocese of New York, the Department of Justice announced.

According to a nine-count indictment filed in U.S. District Court in Manhattan,

Vincent J. Heintz and Nanette B. Melera, both of Briarcliff Manor, New York;
Joseph J. DeRusso, of Florham Park, New Jersey; and Michael J. O’Shaughnessy,
of Queens, New York, used their positions as employees and consultants at
Institutional Commodity Services Inc. (ICS), the purchasing arm of the archdiocese,
to receive more than $1.2 million from vendors supplying goods to the archdiocese.
At least $250,000 of this money was paid in cash. Those charged also diverted at
least $1 million to shell companies they controlled.

“These charges demonstrate the Department of Justice’s resolve to prosecute those

who defraud American consumers,” said Thomas O. Barnett, Acting Assistant
Attorney General in charge of the Department’s Antitrust Division. “The victims in
this case included a not-for-profit corporation and a religious institution operating
schools, hospitals, and convents.”

The indictment charges Heintz, Melera, DeRusso and O’Shaughnessy with mail
fraud and conspiracy to commit mail fraud. DeRusso and Heintz are charged with
one count of conspiracy to defraud the Internal Revenue Service, with DeRusso also
being charged with four counts of tax evasion. Additionally, the grand jury charged
Heintz with one count of making false statements, and charged DeRusso with one
count of obstruction of justice. Heintz was the general manager at ICS and Melera
held the position of food service director. Both are no longer employed with ICS.
DeRusso and O’Shaughnessy were independent consultants for ICS.

“Tax evasion all too often goes hand-in-hand with kickbacks and other financial
crimes,” said IRS acting Chief, Criminal Investigation, Richard Speier. “The IRS is
happy to work with the Department of Justice on these types of investigations to
bring the full force of the government’s criminal statutes to bear.”

Under the ecclesiastical law of the Roman Catholic Church, the Archdiocese of
New York exercises authority over three counties in New York City and seven
adjoining counties in New York State. As part of its responsibilities, the archdiocese
oversees the operations of various facilities including schools, hospitals, and
convents. ICS is a separate not-for-profit corporation and acts as a purchasing agent
for the archdiocese by procuring and reselling to the archdiocese a variety of goods
and services. Heintz, Melera, DeRusso and O’Shaughnessy were empowered to
select vendors able to provide these goods and services.

According to the charges, Heintz, Melera, DeRusso and O’Shaughnessy unlawfully

conspired to defraud the archdiocese of more than $2 million from 1996 until 2004.
As general manager for ICS, Heintz required numerous vendors to pay money–
ostensibly as commissions–to DeRusso, the Department said. Vendors paid
DeRusso more than $1.2 million, which DeRusso secretly shared with the others
charged. The amount of the commissions paid was included in the prices charged to
ICS, which resulted in the archdiocese paying artificially inflated prices for the
goods and services procured by Heintz, Melera, DeRusso and O’Shaughnessy. In
addition, the indictment charges that Heintz, Melera, DeRusso and O’Shaughnessy
embezzled more than $1 million dollars from the archdiocese through a self-dealing
scheme in which they diverted funds earmarked to buy food for the children
enrolled in the archdiocese’s schools to companies they owned and controlled.

Heintz and DeRusso also conspired to defraud the Internal Revenue Service by
arranging for DeRusso to receive at least $250,000 in cash from one vendor of milk
and juice, which DeRusso failed to report as income to the Internal Revenue
Service. DeRusso is additionally charged with tax evasion for the years 1999
through 2002, based on his failure to report cash received from vendors as part of
the self-dealing scheme. According to the indictment, DeRusso obstructed justice
when, after learning of the FBI’s investigation, he gave a representative of a milk
and juice vendor a backdated contract in an attempt to conceal the true nature of
prior cash payments made by the vendor. Finally, Heintz is charged with making
false statements to agents from the FBI and the Internal Revenue Service, when he
falsely claimed that he was not aware that DeRusso had received cash payments
from any ICS vendors.

“This joint investigation, conducted with the full cooperation and assistance of the
Archdiocese of New York, effectively dismantled a fraud scheme that thrived at the
expense of the many parishes, schools, and healthcare facilities which could have
used that money to support their essential services,” said Mark J. Mershon, Assistant
Director-In-Charge of the Federal Bureau of Investigation offices in the greater
New York area.
The mail fraud charge and the mail fraud conspiracy charge each carry a maximum
penalty of 20 years in prison, a $250,000 fine, or both. The tax fraud conspiracy
charge carries a maximum penalty of five years in prison, a $250,000 fine, or both.
Each of the tax evasion counts carries a maximum penalty of five years in prison, a
$100,000 fine, or both, together with the costs of prosecution. The false statements
charge provides a maximum penalty of five years in prison, a $250,000 fine, or
both. The obstruction of justice charge has a maximum penalty of 20 years in
prison, a $250,000 fine, or both.

Today’s charges resulted from an ongoing investigation of food distributors and

suppliers of other goods and services to various not-for-profit entities in the New
York metropolitan area. The investigation is being conducted by the Antitrust
Division’s New York Field Office, with the assistance of the Federal Bureau of
Investigation and the Internal Revenue Service. The Archdiocese of New York
cooperated with the Department’s investigation.

Anyone with information concerning fraud or tax offenses in the food distribution
industry should contact the Federal Bureau of Investigation at (212) 384-2219 or the
New York Office of the Antitrust Division at (212) 264-3179.

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